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My good friend Bruce MacEwen of Adam Smith Esq. recently ran across a training manual providing instructions on proper behavior within organizations. Bruce thought that some of the advice appeared to be very similar to how law firms make decisions. Likewise, when I read it, I thought it described some of the natural propensities of law professors. Is it possible that law partners and law faculty provide the model behavior for all other organizations?

Hold on. The book is serious. And so is the advice. Read the "how to" advice below, which is quoted verbatim from the original source. Then click on the hyperlink where Bruce shares the author and title.

(a) Organizations and Conferences

(1) Insist on doing everything through “channels.” Never permit short-cuts to be taken in order to expedite decisions.

(2) Make "speeches." Talk as frequently as possible and at great length. Illustrate your "points" by long anecdotes and accounts of personal experiences. Never hesitate to make a few appropriate [loyal] comments.

(3) When possible, refer all matters to committees, for “further study and consideration.” Attempt to make the committees as large as possible – never less than five.

(6) Refer back to matters decided upon at the last meeting and attempt to re-open the question of the advisability of that decision.

(7) Advocate “caution.” Be “reasonable” and urge your fellow-conferees to be “reasonable” and avoid haste which might result in embarrassments or difficulties later on.

(8) Be worried about the propriety of any decision – raise the question of whether such action as is contemplated lies within the jurisdiction of the group or whether it might conflict with the policy of some higher echelon.

The above is for the rank and file. Here is some of the advice given to middle management:

(b) Managers and Supervisors

(2) ... . Ask endless questions or engage in long correspondence about instructions. Quibble over them when you can.

That's the headline from the Financial Review, a leading Australian business newspaper. The plot is nearly identical to a September post regarding accounting firms in India. See India, Big 4 and Elite Law Firms in Direct Competition for Highly Lucrative Advisory Work, LWB, Sept 16, 2015. The salient point is not that accounting firms are outmaneuvering the law firms -- they're not, as both stories report a robust flow of laterals in both directions. Rather, it's that the accounting firms are in the game at all.

The story reports:

"There are bigger issues - alternative legal providers, the changing demands of what our people want in terms of non-lineal career paths, the cost pressures on our clients and the demands they place on their lawyers," Baker & McKenzie national managing partner Chris Freeland said.

"That's what keeps me awake at night," he said.

Behind closed doors, however, [the law firms] are genuinely worried about the accounting firms cutting into compliance, due diligence, employment and taxation work, and mergers and acquisitions advisory particularly in infrastructure and inbound investment.

Some law firms are quietly shifting work to boutique accounting firms because they refuse to be in bed with their emerging adversaries.

The Australian legal market liberalized several years, making it possible for nonlawyers to own and control legal enterprises. In contrast, India has rules that are much closer to the U.S. Yet, when it comes to the accounting firms, the official rules don't seem to matter much, as the competitive dynamics vis-a-vis big accounting firms in these two countries are very similar.

A simple explanation is that bar authorities in any country are loath to pursue unauthorized practice of law actions when the clients are multinational corporations and the providers are large accounting firms. That is too big a fight. Further, the rules on unauthorized practice are in place to protect clients, not the guild. Thus, it is not surprising that the accounting firms are getting bolder.

Every lawyer, law professor, law student, and legal commentator has an opinion on this question. Today we can test our views against actual data.

This fall, Lawyer Metrics was given the opportunity to analyze survey data supplied to us from by The Indiana Lawyer, the paper of record for the Indiana legal profession. The sample included 516 respondents drawn from the paper's readership. My colleague at Lawyer Metrics, Evan Parker, sliced and diced the data in a way the gave us some useful insights into the hours/satisfaction question, at least for a broad swath of lawyers in one midwestern state.

Below is a graphic that shows the average level of satisfaction on various dimensions for Indiana lawyers working 60+ hours per week.

After the jump are graphs showing averages for lawyers working fewer hours per week. But before clicking on the hyperlink, answer this question: Are Indiana lawyers with more moderate schedules on average more satisfied or less satisfied than their 60+ hour counterparts? Also, be a good sport and write down your reason why.

Several years ago an Indiana Law alum told me about a video on the Internet that I needed to watch. It was a 1997 Q&A session with Steve Jobs at a conference of Apple developers. Jobs had been fired by the Apple board 12 years earlier but at the time of the video had just been rehired to help turn the company around.

"It's amazing because Jobs essentially describes cloud computing and smartphones nearly a decade before they had entered the market," the alum, who was very successful in business, told me. "To turn them into actual products, Jobs talks about the power of focus and the necessity of always working backwards from the customer. This video is important because it reveals the Jobs playbook before anyone knew it was actually going to work."

Back in my home office, I watched the video several times. And every six months or so I have watched it again (like this morning) to help me evaluate the extent to which I have internalize the core insights. As it turns out, focus and working backwards from students and clients is not my natural mode of thinking. Fortunately, as the video suggests, Jobs developed this mindset through the gradual process of trial and error. In short, it was learned.

The November issue of The American Lawyer contains an essay where I review the Jobs video and apply its core insights to the struggle over market share that is enveloping the large law firm sector. I think my essay is good, but the video itself is timeless. Hence, I am posting the video on The Legal Whiteboard. If you are interested in why most things fail, but a handful of things succeed in a really big way, I encourage you to watch it.

This is Part IV of a blog series that focuses on alumni surveys based on data for Northeastern Law alumni who graduated between 1971 and 2012 (n = 833, 21% response rate). Prior posts covered data related to the pre-law (Part II) and law school (Part III) experience. This final installment summarizes data on the careers of Northeastern alumni.

Varied Careers

One of the most significant post-law school findings from the Northeastern alumni survey is the sheer breadth of careers. Sure, we all know in a general sense that lawyers have very diverse careers, yet I found the sheer magnitude of that diversity both striking and surprising.

Below is a graphic that summarizes the percentage of Northeastern alumni who have worked in a particular practice settings,by decade of graduation.

% Alumni/ae who have worked in Practice Setting, by Decade of Graduation

To interpret this graphic [click on to enlarge], it is important to understand the composition of the underlying data. The survey question asks, “Describe your previous employment history starting with your most recent employer first.” Some graduates have only one job to report -- the one they started after graduation; others have had many. These jobs are then classified by practice setting and binned into the six categories shown in the above graphic. Note that bars total well beyond 100%. Why? Because alumni are changing not just jobs, but also practice settings—on average, at least once, but sometimes two, three, or even four times over the course of several decades.

The graphic above conveys several significant pieces of information:

General point. Legal careers are extremely varied. As it has tightened up, the entry level market has become an area of intense scrutiny, and rightly so because it affects early career lawyers and law school applicant volume. In contrast, the chart above reflects the longer view. It suggests that very able, motivated people who attend law school go on to varied careers that no one could have predicted at the time of enrollment, including--most significantly--the entering student. These generational cohorts are a versatile group that comprise a disproportionate number of leaders in industry, government, and the nonprofit world. Law schools cannot take full credit for this; we admit people of enormous potential. Yet many alumni tell me that their legal training and knowledge has given them an enormous leg up. One law grad who is now a successful business executive recently asked me, "Why is it JD-advantaged? Why not the advantage of the JD?"

Northeastern. It is somewhat surprising that for Northeastern alumni who graduated during the 1970s, 80s, and 90s, 48% have worked in government. That is a big number. Northeastern’s mission and faculty emphasize public service. This same emphasis appears to be reflected in the careers of its graduates.

Changing Legal Ecosystem. As noted in Posts II and III, because the Northeastern alumni survey spans multiple decades, it is possible that responses will be influenced by changes in the underlying legal economy. Stated simply, career opportunities and competition may have changed substantially between 1971 and 2012. Such a pattern appears to be present here. Specifically, 30% or more of graduates of the 1990s and 2000s have worked in private industry compared to 24% or less for those graduating in the 1970s and 80s. This would be consistent with the incomplete absorption theory discussed in Part III. See also Henderson, “Is the Legal Profession Showing its Age,” LWB, Oct 12, 2015.

Practicing versus Non-Practicing Lawyers

Another significant finding that flows from the Northeastern alumni survey are the workplace experiences of practicing versus non-practicing lawyers.

Approximately 25% of respondents were not practicing lawyers but working, with no significant difference by decade cohort. The chart below compares these two groups based on 19 dimensions of workplace satisfaction. The question is drawn directly from the AJD Wave III: “How satisfied are you with the following aspects of your current position?”

Choices ranged from 1 (highly dissatisfied) to 7 (highly satisfied). The chart above summarizes the differential between the two groups. For example, on Intellectual Challenge, we subtracted the non-practicing attorney average from the practicing attorney average. The result is +.35 difference for practicing attorneys, meaning that they are more likely to find intellectual challenge in their work. Likewise, the same results holds for the substance of one's work.

In contrast, on workplace diversity, non-practicing lawyers were significantly more satisfied – on average, roughly 2/3 of a response point. In fact, non-practicing lawyers were more likely to rate their workplaces higher on several surprising factors, including social value of work, performance reviews, work/life balance, and pro bono opportunities.

Can we generalize from these findings?

The results presented in this blog series reflect the collective experience of one law school’s alumni base – Northeastern. There is no way to know if these results can be fairly generalized to the larger law graduate population, though there is a reasonable basis to believe that at least some of them can (e.g., the changing ecology of the legal job economy). Yet, why speculate when the cost of collecting and analyzing the data is going down and the value of such applied research is going up?

Let me reiterate my suggestion from Part I that a consortium of law schools should begin this effort under the aegis of the American Bar Foundation (the prime architect of the AJD Project). Northeastern has agreed to donate the survey and research tools we created as part of the Outcomes Assessment Project. Such an initiative would enable researchers to draw stronger conclusions from these data, including potentially laudatory school-level effects that can help the rest of legal education.

I have been researching legal education for many years. I have spent enough time with alumni at Indiana Law, Northeastern Law, and several other law schools to gain a strong impression that law school graduates are having, on balance, important, satisfying and high-impact careers. Further, there is strong evidence that the legal industry is undergoing a significant structural change – that is much of what the Legal Whiteboard catalogs. This structural change topic is of great interest to prospective students, lawyers, and the mainstream press. Yet, these two themes--the careers of alumni and structural change--are related.

If legal education wants to influence the narrative on the value of the JD degree, it is far better to rely on data rather than rhetoric. My sense is that data on our alumni will tell a rich, balanced story that will enable us to make better decisions for all stakeholders, including prospective law students. Further, if we don’t gather high quality facts, we can expect to get outflanked by a blogosphere and a mainstream press that are armed with little more than anecdotes. To a large extent, that is already happening. Now is the time to catch up.

Credits

This blog post series would not have been possible without the dedication and world-class expertise of my colleague, Evan Parker PhD, Director of Analytics at Lawyer Metrics. Evan generated all the graphics for the Northeastern Alumni/ae Survey and was indispensable in the subsequent analysis. He is a highly talented applied statistician who specializes in data visualization. Evan, thanks for you great work!

Part II of this blog series reported that the top motivations to attend law school have remained the same for over four decades, at least for Northeastern University School of Law (NUSL). Alumni reported the same underlying desire: to build a satisfying, intellectually challenging career where they could help individuals and improve society. This may be an image forged by pop culture and the idealism of youth, but it is also likely sincere. It is the better side of our human nature.

Part II also showed two motivations to attend law school – the desire for “transferable skills” and “eventual financial security"-- that did appear to be shifting over time. I suggested that these shifts are more likely about a changing ecosystem than a fundamental shift in the type of people applying to law school.

A similar ecological theme can be observed in the "During Law School" data. For example, since its reopening in 1968, Northeastern Law has required every graduate to complete four 11-week cooperative placements, usually in four different practice settings (e.g., government agency, public defender, large firm, public interest organization). As noted in Part I, students can be paid during co-op because it is a university rather than an ABA requirement. Cf. Karen Sloan, “The ABA says No to Paid Student Externships,” Nat’l L J, June 10, 2014.

One series of questions in the alumni survey specifically focused on the co-op experience, including co-op quality, what was learned, and whether they were paid. The chart below reveals a steady, four-decade decline in the number of paid co-ops.

In the early 1970s, essentially all four co-ops were paid. By the mid-80s, the average was down to three. Since the 2000s, the average has been two or fewer paid co-ops.

To my mind, the above trendline is compelling evidence of a steady, systemic shift in the legal ecosystem. I have written about this pattern in the past, suggesting that the rate of absorption of law grads into the licensed bar has been going down since the 1980s. See Henderson, “Is the Legal Profession Showing its Age,” LWB, Oct 12, 2014 (noting that between 1980 and 2005, the average age of licensed lawyers increased from 39 to 49).

When I saw this downward trendline for the first time, I recalled my numerous interviews with NUSL alumni/ae from the 1970s. In describing their co-ops, they spoke of opportunities that were plentiful and varied. I often heard the refrain, “I paid for law school mostly with my income from co-op.” Note that during the 1970s, graduating from college was much less prevalent than today. Law firms were also growing, with 1970 becoming a major inflection point in the rise of the large law firm. See Galanter & Palay, Tournament of Lawyers (1991) (seminal text collecting and analyzing data on the growth of large firms).

The trendline on paid co-ops also made me rethink what I heard from NUSL co-op employers. The school has roughly 900 employers who regularly or semi-regularly participate in co-op. I heard several regular employers express strong preferences for “third or fourth co-ops." Why? Because third or fourth co-op students already had significant legal experience and needed less training to be valuable to the employer. Training is costly. Even if the trainee is unpaid, the lawyer-as-teacher is expending their own valuable time. If an employer is going to provide training, they need a way to recapture that investment. Unpaid labor for eleven weeks is one potential way; if the labor is already partially trained, that is even better.

Unfortunately, doing a great job for a co-op employer does not guarantee permanent employment or even a modest wage for temporary work. The legal ecosystem does not reliably and consistently support those outcomes. Yet, 20, 30, or 40 years ago, the dynamics were far more favorable.

Obviously, in the year 2015, law grads are having a difficult time finding permanent, long-term professional employment (bar passage-required, JD-advantaged, or non-legal professional jobs). The shortage of high-quality entry level jobs has given rise to criticisms that legal education needs more practical training. The implicit assumption is that such a change will cure the underemployment problem. I am skeptical that is true.

A more likely explanation for law grad underemployment is that the supply of trained lawyers is in excess of demand, partially due to demographics and partially due to the inability of most citizens to afford several hours of a lawyer's time. This is a very difficult problem to fix. But misdiagnosing the problem does not help.

To the extent a legal employer is looking for a practice-ready law grad, Northeastern’s co-op model is as likely to deliver that outcome as anything else I have observed. My in-depth review for how co-op affects professional development is written up in OAP Research Bulletin No. 3. Ironically, what may be the best practice-ready model among ABA-accredited law schools is a 50-year old program that most critics may not know exists. But see Mike Stetz, “Best Schools for Practical Training,” Nat’l Jurist, March 2015 (ranking Northeastern No. 1).

The experiential education crowd will be heartened by another “During Law School” finding. Among 833 alumni respondents, there were more than 3,200 co-ops identified by practice setting. Alumni were asked to identify their most valuable co-op and provide a narrative as to why.

Below is a chart that plots the difference between the baseline frequency of a particular co-op practice setting and how often that practice setting was picked as the most valuable. The scale is in standard deviation units, with “par” meaning that the practice setting was most valuable in the same proportion as its frequency in the overall sample.

It is not hard to see the common theme. Co-ops where students can observe lawyers in action – or better yet, get stand-up time in court – were rated as much more valuable. The table below captures some of the underlying narrative comments.

Building on the introduction (Part I) of this blog series, our alumni survey of Northeastern University School of Law yielded cross-sectional data that span graduates from 1971 to 2012. Because of the large time span, some of the most interesting responses to questions tend to fall into two buckets:

What is staying the same? Here we are looking for response patterns that are relatively stable and constant across age cohorts.

What is changing? Likewise, we are also interested in responses that appear to be changing as a function of time of graduation.

In the portion of our analysis that looked at pre-law characteristics and motivations, our most striking findings tended to fall into bucket #1.

For example, below is a graphic summarizing responses to the question, “How important were the following goals in your decision to attend law school?” Responses are organized by decade of graduation. They are ordered by most important to least important for respondents who graduated in 2000 or later.

Goals for Attending Law School, by Decade of Graduation

One of the most striking features is that the top three responses are essentially identical for all four age cohorts. For each group, the desire to have a satisfying career, help individuals, and improve society were all, on average, very important in the decision to attend law school.

Although there are differences across age cohorts, there remains relatively clear clustering by decade of graduation. (Query: would this same pattern hold true at other law schools? One of the advantages of pooling data across schools is the ability to isolate a self-selection effect that operates at the school level.)

Yet, some factors appear to be changing over time, such as the importance of transferable skills and eventual financial security. With each decade cohort, respondents are rating these factors progressively more important to their decision to attend law schools. Likewise, “other goals” appear to be progressively less important.

These patterns (and others survey results I will report in Parts III and IV) suggest gradual changes in the knowledge worker ecosystem that require students to be more deliberate and focused in their decision to attend law school. For example, costs of all of higher education are going up at the same time that the financial payoffs of traditional graduate and professional education are becoming less certain. This is an ecological effect that is bound to have an influence on students and student decision making. Although legal education would be part of this shift, the shift itself would not be unique to law.

This interpretation is consistent with our focus group discussions with Northeastern alumni. This group queried whether the term “transferable skills” was even part of the lexicon when they were graduating from college. Likewise, the group commented that the decision to attend law school during the 1970s and 1980s was not difficult because tuition was relatively low and jobs, including paid co-op jobs, were relatively plentiful. Although the legal market may be tighter and more complex than in earlier decades, the Northeastern alumni commented that the tradeoffs were changing for all knowledge workers.

Several years ago, as the legal academy was beginning to work its way through the implications of the landmark “After the JD” Project (AJD), one of the principal investigators, Bryant Garth, commented to a group of fellow law professors that “within a few years it will be educational malpractice for law schools to not study their own alumni.”

Garth had special standing to make this claim, as he had launched the AJD during his long tenure at the American Bar Foundation and then went on to serve as Dean of Southwestern Law School in Los Angeles. While at Southwestern, Garth taught a short 1L course about legal careers that combined AJD findings with live interviews with Southwestern alumni. Despite decades of research studying lawyers, Garth gushed at how much he personally learned from these interviews and how the narratives were often surprising and inspiring, particularly for Southwestern students filled with apprehension at what the future might hold.

Northeastern is an interesting case study because for nearly 50 years the school has required four 11-week cooperative placements (or “co-ops”) as a condition of graduation. To facilitate completion within three years, the 1L year at Northeastern is taught in semesters while the 2L and 3L years are taught over eight alternating quarters. Summer-winter co-op students take classes during the fall and spring quarters, while fall-spring co-op students attend classes in the summer and winter quarters. Because co-ops are not for academic credit – they fulfill Northeastern University rather than ABA-accreditation requirements – students can be paid for the full 11 weeks. (More on that in Part III of this series.)

Dean Spieler wanted a third party to study Northeastern because, in her experience as dean, her many encounters with Northeastern alumni suggested to her that the School’s unusual education model was accelerating the professional development of its students and enabling them to make better, more informed career choices.

Acceleration of profession development is a very difficult effect to measure, but it is certainly plausible. In fact, the entire experiential law movement is largely premised on this claim. So I signed onto a multi-year initiative that we called the Outcomes Assessment Project (OAP).

The premise of the OAP was very unusual. Through a generous but anonymous benefactor, the research tools and templates developed for the OAP would be made available to other law schools interested in studying graduates. The intent is for law schools to accumulate data using similar methods and instruments, driving up the value of the data (because it is comparable across schools) while driving down the cost of collection and analysis.

There are many phases to the OAP, including those focused on admissions, the student experience, and co-op employers. Here, however, I wanted to write about what we learned from a survey of Northeastern’s alumni.

Last fall, we sent a survey instrument to Northeastern alumni who graduated from the law school between 1971 and 2012 (~4,000 law grads for which NUSL had a current email address). The survey instrument was substantially based on the AJD Wave III survey instrument, which was sent to a representative sample of law graduates from all ABA-accredited law schools who took the bar in the year 2000.

In contrast to the AJD, which has produced remarkable knowledge about law school grads from the year 2000, the OAP Alumni/ae Survey included four decades of law graduates from a single law school. Although this is not a true longitudinal sample, which samples the same people over time, this methodology enables cross-sectional comparisons between different cohorts of graduates (e.g., by decade of graduate or pre/post AJD).

The response rate of the Northeastern alumni survey was 21% (833 total completed questionnaires), which is relatively high for a long online survey. Because the resulting sample substantially mirrored the baseline data we had for Northeastern alumni practice areas and years of graduation, we were confident that the resulting sample was both representative and reliable.

Applied Research

Similar to the AJD, the OAP Alumni/ae Survey produced enough data to keep researchers busy for several years. Hopefully, these data will eventually be archived and aggregated at the American Bar Foundation or a similar institution in order to facilitate a broader and deeper understanding of legal careers.

However, the OAP was largely set up to be applied research. What does this mean? Here, the goal is, at least in part, to obtain data that is operational in nature, thus enabling a law school to examine and test fundamental assumptions and generate insights related to its stated goals and mission. In a word, to improve.

Further, when skillfully boiled down using data visualization, the findings themselves tend to be of great interest to all law school stakeholders, including alumni, faculty, administrative staff, current students, and prospective students. Interest is particularly piqued during times of transition and uncertainty, such as now, when law schools and the practicing bar are looking to each other to provide potential answers and support.

To makes results as accessible as possible, we decided to present the preliminary Alumni Survey results in a simple three-part framework:

Before Law School: pre-law characteristics and motivations

During Law School: the law school experience

After Law School: job mobility and satisfaction

This week, I am going to give a sampling of findings from all three sections – findings that will likely be of interest to a non-Northeastern audience of law faculty, practicing lawyers, and students. If you are interested in reading the entire preliminary report, it can be found online at the Northeastern OAP website.

Amidst all the other newsworthy topics, the New York Times editorial board made law school debt the lead editorial for today's Sunday edition. And the story line is not good.

The editorial starts with the bleak statistics for Florida Coastal Law School -- low median LSAT scores and high debt loads, casting doubt on whether its graduates can pass the bar exam and repay their federally financed student loans. The editorial highlights Florida Coastal' for-profit status but goes on to note that the rest of legal education is not much better.

A majority of American law schools, which have nonprofit status, are increasingly engaging in such behavior, and in the process threatening the future of legal education.

Why? The most significant explanation is also the simplest — free money.

The editorial details changes in federal higher education finance that created the Direct PLUS Loan program, which, over-and-above Federal Stafford Loans, underwrites up to the full cost of attendance as determined by each law school. The combination of poor job prospects and high debt have depressed applicant volume. As the Times editorial notes, the systemic impact has been to lower admissions standards to sweep in students who will, as a group, struggle to pass the bar exam following graduation. Virtually all of this is financed by DOE loan money.

I don't think the typical member of the legal academy understands the precarious financial condition of legal education. The precariousness exists on two levels: (1) our financial fate is in the hands of the federal government rather than private markets; and (2) the Times editorial suggests that we have a serious appearance problem, which draws down the political capital needed to control our own destiny. With the political winds so goes our budgets.

I think it is important for the Association of American Law Schools (AALS) to take some decisive action in the very near future. In this blog post, I explain where the money comes from to keep the law school doors open and why, as a consequence, we need to pay closer attention to the public image of legal education. I then offer some unsolicited advice to the AALS leadership.

(1) Who pays our bills?

Over the last decade, the federal government has, as a practical matter, taken over the financing of higher ed, including legal education.

Here is how it works. Any law student who needs to borrow money to attend law school is strongly incentivized to borrow money from the Department of Education (DOE). Although the DOE loans carry high interest rates -- 6.8% for Stafford Loans and 7.9% for Grad Plus -- they include built-in debt relief programs that functionally act as insurance policies for the risk that a graduate's income is insufficient to make timely loan repayments. Law school financial aid offices are set up around this financial aid model and make it very easy for students to sign the loan documents, pay their tuition, and get disbursements for living expenses.

In the short to medium term, this is good for the federal government because the loans are viewed as income-producing assets in the budgets that get presented to and approved by Congress. But in the longer term this could backfire if a large portion of students fail to repay their full loans plus interest. Federal government accounting rules don't require projections beyond ten years. But already the government is beginning to see the size of the coming write-downs for the large number of graduates who are utilizing the Public Service Loan Forgiven program, which has a ten-year loan forgiveness horizon. And it is causing the feds to revise their budgets in ways that are politically painful. With the loan forgiveness programs for private sector law grads operating on a 20- to 25-year repayment window, the magnitude of this problem will only grow.

The enormous risk here for law schools is that Congress or the DOE will change this system of higher education finance. For example, the Times editorial calls for capping the amount of federal loans that can be used to finance a law degree. Currently, the limit on Stafford Loans for graduate education is $20,500, but Grad Plus loans have no limit at all. If the DOE were to cap Grad Plus at $29,500 per year, leading to a total three-year federal outlay of $150,000 per law student, this would have an enormous adverse impact on the typical law school budget.

Law School Transparency reports that the average law school debt load for a 2014 law graduate is $118,570, but we know very little about the full distribution. Because of the pervasiveness of the reverse Robin Hood policy, which uses tuition dollars of low credentialed students to finance scholarships for their high credentialed peers, there is likely a significant percentage of students at most law schools who graduate with more than $150,000 in law school debt. Further, according to US News, there are twelve law schools -- including three in the T14 -- where the average law school debt load is more the $150,000. Although there are no statistics on the percentage of law students graduating with greater than $200,000 in law school debt, law students tell me this amount is common.

I have translated this meager public information into the chart below. The area in green is the volume of money that could disappear from law school budgets if the federal government imposed a hard limit on federally financed law school lending.

Why would this money be at grave risk? Two reasons:

First, private lenders will be reluctant to cover the entire shortfall. For decades, private lenders played an important roll in law school finance. But these lenders got pushed out of the market by the changes in federal higher ed finances described above. Unfortunately, in the intervening years, the ratio of earning-power-to-debt has gotten too far out of whack. To come back into this market, private lenders would need to be confident that loans would be repaid. That likelihood is going to vary by law school and by law student, raising the cost of lending. This means that, to varying degrees, virtually all law schools would have to sweat over money. Unlike Grad Plus, private lenders may balk at financing full sticker tuition for lower credentialed students trying to attend the highest ranked school that admitted them.

Second, private lenders will not offer the same loan forgiveness options, such as IBR and Public Service Loan Forgiveness, currently offered by the federal government. With the curtailed scope of these functional insurance programs, some portion of prospective law students will likely be unwilling to sign loan documents in excess of the federal lending cap. Even very elite schools will feel the pain here.

(2) An appearance problem in the world of politics

I would bet a lot of money that law faculty have been emailing the Times editorial to one another, criticizing its lack of nuance. But here is our problem. We are not in a court where a judge will listen to our elegant presentation of facts and law. Nor are we in the world of private markets where we can expect people to reliably follow their own economic self-interest. We are in the realm of politics where sides get drawn based on appearance and political expediency. To make matters worse, the legal academy just got lambasted by the paper of record on the left.

It is hard to argue that a cap on federal funding of legal education would be bad policy for students, the legal profession, taxpayers, or broader society. Such a change would:

Reduce the number of law grads going into a saturated labor market;

Reduce the number of low credentialed students admitted to law school who will one day struggle to pass the bar;

Reduce the risk of nonpayment of students loans currently borne by US taxpayers;

Put in place serious cost-containment on legal education.

For law schools, however, such a change would produce layoffs and pay reductions. And that may be the fate of the luckier schools. It is widely known that most law schools are running deficits. Central universities are looking for ways to wait out the storm. But the cliff-like quality of a federal cap on law school lending would call the question of how much support is too much.

What's the solution?

Legal education has a cost problem, but so does the entire higher ed establishment. Here is my unsolicited advice.

The leadership of the AALS needs to take a very strong public position that the trend lines plaguing higher ed need to be reversed. This is not risky because it is so painfully obvious. The AALS should then, in conjunction with the ABA, send a very public delegation to the Dept of Education. The delegation should be given a very simple charge: Help the DOE

Outline the systemic problems that plague higher education

Articulate the importance of sound policy to the national interest

Formulate a fair and sustainable solution.

I have faith that my legal colleagues would do a masterful job solving the problems of higher education. And in the process, we'll discover that we have become the architects of a new system of higher ed finance that will be fair and equitable system for all stakeholders, including those employed in legal education. That's right: act decisively to ensure a fair and equitable deal. The only drawback is that it won't be the status quo that we'd instinctively like to preserve.

Natalie Kitroeff at Bloomberg published earlier today an article with the first release of the median MBE scaled score for the July 2015 Bar Exam -- 139.9 -- a decline of 1.6 points from the July 2014 score of 141.5.

While this represents a continuation of the downward trend that started last year (when the median MBE fell a historic 2.8 points from 144.3 in July 2013), the result is nonetheless somewhat surprising.

The historic decline in the median MBE scaled score between 2013 and 2014 corresponded to a modest decline in the LSAT score profile of the entering classes between 2010 and 2011.

As I discussed in my December blog posting on changing compositions of the entering classes since 2010, however, the decline in LSAT score profile of the entering classes between 2011 and 2012 was much more pronounced than the decline between 2010 and 2011. Thus, one might have expected that the decline in the median MBE scaled score for 2015 would have been even larger than the decline between 2013 and 2014.

But instead, the decline was only 1.6 points, just slightly more than half of the 2.8 point decline of the previous year.

Why would a demonstrably greater decline in the LSAT profile of the entering class between 2011 and 2012 (compared with 2010-2011) yield a manifestly smaller decline in the median MBE scaled score between 2014 and 2015 (compared with 2013-2014)?

This likely will remain a mystery for a long time, but my guess is that the ExamSoft debacle resulted in an aberrationally large decline in the median MBE scaled score between 2013 and 2014, such that the corresponding decline between 2014 and 2015 seems disproportionately smaller than one would have been expected.

Over on Law School Cafe, Debby Merritt has a very good description of the different factors that likely have impacted bar passage performance in July 2015.

Derek Muller has collected bar passage results for the several states that have released at least some results so far and has posted them on his Excess of Democracy blog. Focusing only on overall bar passage rates, two states are "up," (North Dakota (6%) and Iowa (5%)), six are down between 1-5% (Missouri (-1%), Washington (-1%), Montana (-2%), Kansas (-3%), North Carolina (-4%), West Virginia (5%)), and four are down double-digits (Mississippi (-27%), New Mexico (-12%), Oklahoma (-11%), and Wisconsin (-10%). (Last year 21 states were down 6% or more on first-time bar passage and six of those were down 10% or more.)

In a recent post, I urged readers to visit a legal department with a large legal operations staff. The goal? To see the future of modern corporate law practice. Fortunately, Bloomberg Law recently videotaped a legal ops panel moderated by Amar Sarwal of the ACC. It contains a conversation rarely if ever heard in law schools or bar associations.

The three legal departments profiled are AIG (insurance), Marsh & McLennan (diversified financial and professional services), and GlaxoSmithKline (pharma). Note the enormous emphasis on metrics, data, and technology. Note also how the services of law firms are being put through a procurement process.

If you're trying to maximize the financial value of an undergraduate degree, it is better to bet on course of study than college prestige. Indeed, prestige is largely irrelevant to those who major in engineering, computer science, or math. In contrast, prestige does matter for art & humanities grads, albeit the financial returns are significantly lower than their tech counterparts.

These are some of the takeaways from Part I of this blog post. Part I also presented data showing that law is a mix of both: financial returns have been high (cf. "red" tech majors) and prestige matters (cf. "blue" arts & humanities crowd).

The goal of Part II is to address the question of whether the pattern of high earnings/prestige sensitivity will change in the future. I think the answer to this question is yes, albeit most readers would agree that if law will change is a less interesting and important question than how it will change. Speed of change is also relevant because, as humans, we want to know if the change is going to affect us or just the next generation of lawyers.

Shifts in the Legal Market

There are a lot of changes occurring in the legal market, and those changes are altering historical patterns of how legal services are being sold and delivered to clients. In the past, I have thrown around the term structural change, yet not with any clear definition. To advance the conversation, I need to correct that lack of precision.

In economics, there is a literature on structural change as applied to national or regional economies (e.g. moving from a developing nation to an industrial nation; or moving from an industrial to a knowledge-based economy). Investors also focus on structural change within a specific industry because, obviously, large changes can affect investor returns. When I have used the term structural change on this blog, it has been much closer to investor conceptions. Investopedia offers a useful definition even if it's somewhat colloquial:

Definition of 'structural change': An economic condition that occurs when an industry or market changes how it functions or operates. A structural change will shift the parameters of an entity, which can be represented by significant changes in time series data.

Under this definition, the legal industry is certainly undergoing structural change. The proportion of law graduates getting a job in private practice has been on the decline for 30 years; over the last 35 years, the average age of the licensed lawyer has climbed from 39 to 49 despite record numbers of new law school graduates; the proportion of associates to partners has plummeted since the late 1980s. See Is the Legal Profession Showing its Age? LWB, October 12, 2014. Since the early 2000s, long before the great recession, associate-level hiring has been cut in half. See Sea Change in the Legal Market, NALP Bulletin, August 2013.

Likewise, among consumers of legal services, there is a lot of evidence to suggest that lower and middle class citizens can't afford a lawyer to solve life's most basic legal problems, thus leading to a glut of pro se litigants in state courts and many more who simply go without things like contracts and wills. This troubling trend line was obscured by a boom in corporate legal practice, albeit now even rich corporations have become more sensitive to legal costs -- the sheer volume and complexity of legal need is outstripping their budgets. In response to the lag in lawyer productivity and innovation, there is a ton of investor-backed enterprises that are now elbowing their way into the legal industry. See A Counterpoint to "the most robust legal market that ever existed in this country", LWB, March 17, 2014.

The impact of all this change -- structural or otherwise -- is now being felt by law schools. Applicants are down to levels not seen since the 1970s, yet we have dozens more law schools. It has been said by many that law schools are losing money, albeit we have zero data to quantify the problem. Based on my knowledge of my own law school and several others I am close to, I am comfortable saying that we have real changes afoot that affect how the legal education market "functions or operates."

There is a sense among many lawyers and legal academics that the legal world changed after 2008. None of the "structural" changes I cite above are pegged in any way to the events of that year.

What did change in 2008, however, was the national conversation on the legal industry, partially due to the news coverage of the mass law firm layoffs, partially due to important books by Richard Susskind and later Brian Tamanaha and Steve Harper, and partially due to a robust blogosphere. This change in conversation emboldened corporate legal departments to aggressively use their new found market power, with "worthless" young associates getting hit the hardest. This new conversation in turn exposed some of the risks of attending law school, which affected law school demand. But alas, this was all fallout from deeper shifts in the market that were building for decades. Let's not blame the messengers.

Dimensions of Change

I am confident that the future of law is going to be a lot different than its past. But I want to make sure I break these changes into more discrete, digestible parts because (a) multiple stakeholders are affected, and (b) the drivers of change are coming from multiple directions.

Dimension 1: basic supply and demand for legal education

To unpack my point regarding multiple dimensions, let's start with legal education. Some of the challenges facing law schools today are entirely within the four corners of our own house. Yet, legal education also has challenges (and opportunities) that arise from our connection to the broader legal industry. This can be illustrated by looking at the relationship between the cost of legal education (which law schools control, although we may blame US News or the ABA) and entry level salaries (which are driven largely by the vagaries of a client-driven market).

The chart below looks at these factors. My proxy for cost is average student debt (public and private law schools) supplied by the ABA. My income variables are median entry level salaries from NALP for law firm jobs and all entry level jobs. 2002 is the first year where I have all the requisite data. But here is my twist: I plot debt against entry-level salary based on percentage change since 2002.

If a business nearly doubles its price during the same period when customer income is flat, demand is going to fall. Thus, the sluggish entry-level market presents a difficult problem for legal education. Sure, we can point to the favorable statistics from the AJD or the premium that a JD has historically conferred on lifetime earnings, but law professors are not the people who are signing the loan papers. The chart above documents a changing risk/reward tradeoff. To use the frame of Part I, the red dots are sinking into the blue dot territory, or at least that is the way prospective students are likely to view things.

Fortunately, smaller law school classes are going to be a partial corrective to low entry-level salaries. The biggest law school class on record entered in the fall of 2010 (52,488); in 2014, the entering class had shrunk by over 27% (37,942). When entry-level supply is reduced by 25+%, upward pressure on salaries will build. Yet, the composition of the legal economy and the nature of legal work is clearly changing. Further, the rate of absorption of law school graduates into the licensed bar has been slowing for decades. See Is the Legal Profession Showing its Age? LWB, October 12, 2014. It would be foolhardy to believe that time and fiscal austerity alone are going to solve our business problems. Instead, we need to better understand our role as suppliers to a labor market.

Dimension 2: The content of legal education

The content of legal education is not necessarily fixed or static. We could change the content, thus affecting how the market responds.

To provide a simple example, one of my students is starting work this fall at Kirkland & Ellis. From a financial perspective, this is a good employment outcome. He will be moving to Chicago with his girlfriend who just received her MS in Information Systems from IU's Kelley School of Business. The MS from Kelley is a very "red" degree. It can also be completed in one year (30 credit hours). Well before she graduated, this recent grad had competing offers from PWC and Deloitte, both in the $80,000 range. For many Indiana Law students, an ideal post-grad outcome would be $80K in Chicago at an employer who provides challenging work and high-quality training. Yet, my student's girlfriend got this ideal outcome in 1/3 the time and likely 1/2 the cost of an Indiana Law grad.

Perhaps we should consider cross-pollinating these disciplines. A huge portion of the legal profession's economic challenges is attributable to flat lawyer productivity -- customers are struggling to pay for solutions to their legal needs. Information systems are a huge part law's productivity puzzle. Below is a chart I use in many of my presentations on the legal industry. The chart summarizes the emerging legal ecosystem by plotting the Heinz-Laumann two-hemisphere model against Richard Susskind's bespoke-to-commodity continuum. [Click-on to enlarge.]

The key takeaway from this diagram is that the largest area of growth is going to be in the multidisciplinary green zone -- the legally trained working shoulder-to-shoulder with those skilled in information systems, statistics, software development, and computational linguistics, to name but a few. These are "red" disciplines. Do law schools want to be part of this movement? Let me ask this another way -- do law schools want to be relevant to the bulk of the legal market that needs to be rationalized in order to maintain its affordability? Harvard grads will have options on Wall Street for the foreseeable future. But 98% of law schools operate in a different market. Further, some HLS grads, or students who might qualify for admission to Harvard, might prefer the big upside rewards that are only available in the green zone. In short, a new hierarchy is emerging in law that is still very much up for grabs.

If an academic wants to better understand the rapidly changing nature of legal work, I would urge them to visit a large legal department with a substantial legal operations ("legal ops") staff. These are the professionals who have been empowered by general counsel to find ways to drive up quality and drive down cost using data, process, and technology. These are the folks who are making build-versus-buy decisions, putting pressure on law firms to innovate in order to hang on to legal work, and experimenting with NewLaw legal vendors.

I am finishing up a story on legal ops professionals for the ABA Journal. (By the way, legal ops exist in law firms as well as legal departments and green zone legal vendors. The role is most developed, however, in legal departments.) My editor flagged the issue that virtually all of the legal ops people in the story did not graduate from prestigious law schools (or any law school).

My only response is that legal operations people have specialized skills and knowledge (often "red" but sometimes involving EQ) that others lack; without these skills, they can't do the job. Legal ops people live in a world of outputs and metrics. For example, are legal expenses and settlement amounts trending down over time -- yes or no? If so, by how much? How much internal staff time does it take to negotiate a revenue contract? How much of this process can be automated? What will it take to get our staff to accept the new system?

As these examples show, a legal ops person is typically going to be evaluated based on measurable outputs -- do they get results? Where someone went to law school is an input that is likely irrelevant to the question. The only qualifier is whether the curriculum of that school provided valuable, specialized domain knowledge -- most likely non-legal red skills but also skills related to teams, communication, and collaboration.

Dimension 3: The value of pedigree to the customer

Law has historically been what economists call a “credence good.” This means that a layperson has a difficult time assessing quality. As a result, proxies for quality, such as pedigree or prestige, have historically been very important when hiring a lawyer or law firm.

One of the reasons that the field of legal operations is gaining momentum is because it is creating tools and systems that enable clients to look past credentials to obtain information on things they really care about, such as cost, outcome, and speed of delivery. There are now companies coming into existence that are gathering data on lawyers' win-loss rates. See Another Example of Using Big Data to Improve Odds of Winning in Court, LWB, April 12, 2015. Sure, apples-to-apples comparisons are very difficult to make -- every case is unique in some respect. But the amount of money at stake is large enough that the data challenges will be surmounted. When that day arrives, we won't opine on the value of pedigree to legal outcomes; we'll just calculate it. More significantly, clients focused on outcomes will change their buying patterns. Early returns I have seen suggest that the value of pedigree to legal outcomes may be close to negligible.

Do any of us care where the engineers who designed our smart phones went to college? Not really. We just care how well the smart phone works.

In this respect, the future of law is likely headed in the direction of Google (a pure red company). In the early days, the founders of Google favored grads of Caltech, Stanford and Berkeley. But over time, the company learned that prestige of graduate school was a poor predictor of job success. Because Google lives and dies by its outputs, the company changed its hiring model to attract the most qualified engineers. See George Anders, The Rare Find: How Great Talent Stand Out 1-5 (2012) (telling the story of how data changed the attitudes of Google founders regarding elite credentials and altered the Google hiring model).

I have lived long enough to know that the changes I describe above are not necessarily going to be welcomed by many lawyers and law professors. If a group benefits from a lifelong presumption of merit, it is natural that group will resist evidence that the presumption is not fully warranted. Indeed, much of the skepticism will be rooted in subconscious emotion. If the presumption is dashed, those of us in the elite crowd will have to spend our days competing with others and proving ourselves, or even worse, watching our kids soldier through it. We have little to gain and a lot to lose in the world we are heading into. Yet, behind the Rawls veil of ignorance, how can we complain?

So with the red-blue crosscurrents, is law school still worth the investment?

That is a relevant and reasonable question that many young people are contemplating. I will offer my opinion, but markets are bound to follow their own logic.

This is a time of enormous uncertainty for young people. Education clearly opens doors, but tuition is going up much faster than earnings. Further, competition among knowledge workers is becoming more global, which is a check on wages. Of course, if you don't invest in education, what are your options?

I am generally on the side of Michael Simkovic and Frank McIntrye that the education provided by a law degree, on average, significantly increases lifetime earnings. See The Economic Value of a Law Degree (April 2013). How could it not? The law is too interconnected to every facet of society to not, on average, enhance the law grad's critical thinking skills. Nearly 15 years of out of law school and I regularly use what I learned at Chicago Law to solve problems and communicate solutions, particularly in my applied research work with law firms and legal departments. While my Chicago Law credential has value independent of the skills and knowledge I obtained (the red AJD bar chart in Part I strongly suggests that), I can't deny the additional value of the actual skills and knowledge I obtained to solve real world business problems. It's been substantial.

In the face of these stiff headwinds, I think law schools have an opportunity to pack more value into three years of education. See Dimension 2 above. To be more specific, if you are a protege of Dan Katz at Chicago-Kent, you will have a lot of career options. Ron Staudt, also at Chicago-Kent, has quietly built a pipeline into the law and technology space. Oliver Goodenough and his colleague at Vermont Law are making rapid progress with a tech law curriculum. And at Georgetown Law, Tanina Rostain and Ed Walters (CEO of Fastcase) provide courses that are cutting edge.

But absent these types of future-oriented instruction, what is the value of a JD degree as it is commonly taught today? That value is clearly positive; I would even call it high. But whether the value is sufficient to cover the cost of attendance is likely to vary from law grad to law grad. Lord knows, in a world of variable tuition based on merit scholarships and merit scholarships that go away after the 1L year, the swing in cost can be a $250K plus interest.

What is killing law school applications these days is the lack of near certainty among prospective students that the time and expense of law school will pay off. The world looks different than it did in the fall of 1997 when the vast majority of the AJD respondents entered law school. Tuition and debt loads are higher and high paying entry-level jobs are harder to obtain.

So what is the solution? For students, it's to bargain shop for law schools, which is bad news for law schools. For law schools, it's to add more value to an already valuable degree. Some of that value will come in the form of red technical skills that will make lawyers more productive. In turn, this will prime demand for more legal products and services.

The Economist reports a very interesting analysis from Payscale. The questions being asked are pretty simple: If you want to generate earnings that justify the time and cost of an undergraduate education, what should you study and where should you enroll?

Lots of people have strong opinions on this set of questions, but Payscale has the data to answer them empirically. It turns out that at the undergraduates level, course of study is much more important than the prestige of the college or university you attend. The hard evidence is shown below.

For those working in law or thinking about attending law school, a natural question to ask is whether the legal industry is closer to the blue dot (art & humanities) or red dot pattern (engineering/CS/math). A second, related question whether the future of law is more blue or more red.

This a two-part blog post. Part I tries to answer the first question, starting with a careful analysis of the undergraduate chart, which provides a valuable frame of reference that can be discussed more dispassionately (at least among lawyers and law students) than an analysis that questions the value of law school prestige and hierarchy.

Part II, which I will post on Wednesday, explores the second, future-oriented question. I will tip my hand now and say that the future of law will be less blue (arts & humanity) and more red (math/CS/engineering). Within the legal industry, there will be winners and losers; but from the perspective of broader society, this change is a very good thing.

Undergraduate ROI

In the Payscale chart above, the y-axis (vertical) is 20-year annualized returns from college fees paid. The x-axis is selectivity, running from under 10 percent to near open admissions.

The Payscale chart is a very good example of how data visualization can be used to communicate both core facts and useful nuance. Here, the lede is unmistakable: the red dots (engineering/CS/math) are overwhelming higher on the ROI scale than the blue dots (arts & humanities). Sure, there are exceptions to this rule, but they don't occur very often. (Observe how rarely a blue dot is above the red fit-line.) This suggests it would be very foolish to get a blue degree and expect a red paycheck unless you have very good information (or skills or talent) that others lack.

The chart conveys another important piece of information -- the red fit-line is flat. This means that for engineering/CS/math majors, prestige has not been very relevant to their eventual earnings. I'll add a nuance here that some empirically savvy readers are bound to point out: It is possible (indeed likely) that fees are higher at more selective schools. So if MIT costs twice as much as a public polytech, and both yield 12% over 20 years, one might wish they had gone to MIT. Still, the flat trendline is surprising. As a general matter, lower ranked schools are not dramatically cheaper than higher ranked schools, and many public schools are highly selective. The flat red trendline suggests that there are (or were, remember these are historical data) many bargains out there. If one is trying to maximize financial returns, the goal is to find a school that will, in the future, be well above the red fit-line (and avoid those below).

The flat red fit-line is also surprising because college selectivity is almost certainly highly correlated with ACT or SAT scores, which our society often views as measures of general intelligence. Yet, there we have it -- a flat trendline. Four years of education seem to be more relevant than a standardized test score taken during high school. That is heartening at many levels.

A third interesting trend -- the blue fit-line is sloped downward. This suggests that in the arts & humanities, selectivity/prestige does have a financial payoff. I don't think this will surprise many readers, albeit the prestige payoff is not very large. To use a simple metaphor, if you attend a more selective college or university to get your arts or humanity degree, you are likely to have a better house in the arts & humanities neighborhood. But on average, you won't be able to afford the same neighborhood as the engineers, computer scientists, and math majors.

What about Law?

Moving on to law, if we want to examine the relationship between earnings and law school attended, the best available evidence is probably the After the JD Study (AJD), which is large, representative sample of law graduates who took and passed the bar in 2000.

Data from AJD Wave 3 suggests that the financial returns are relatively strong for all law school graduates -- ten years out and graduates of Tier 4 schools have median earnings of $100,000 per year. As shown in chart below, this is akin to shifting the blue dots up into the red territory.

The downward sloping fit-line remains, but that doesn't seem to matter very much to happiness. Other AJD data shows that regardless of tier of graduating school, AJD respondents show relatively high and uniform satisfaction with (a) the decision to become a lawyer, and (b) the value of the law degree as an investment. By 2010, 48% of respondents had no debt; only 5.1% had more than $100K in educational debt remaining.

This is all good news. But is it reasonable to extrapolate forward and assume the past is a fairly accurate barometer of the present and the future?

One way to address that question is to ascertain what has changed since 2000. As noted earlier, the AJD sample was composed of law graduates who passed the bar in the year 2000. Figures published by NALP and the ABA show that the percentage of full-time bar passage required jobs has dropped significantly over the last 13+ years -- from 77.3% for the class of 2000 to 57% for the class of 2013. That is a huge delta.

One of the reasons why law school applicants have plummeted is that the career path from JD graduates has become murky. And that is a good place to start Part II.

Plexus, a NewLaw law firm based in Australia, has just released a new legal product that purports to apply artificial intelligence to a relatively common, discrete legal issue -- detemining whether a proposed trade promotion (advertisement in US parlance) is in compliance with applicable law.

In the video below, Plexus Managing Partner Andrew Mellett (who is a MBA, not a lawyer), observes that this type of legal work would ordinarily take four to six weeks to complete and cost several thousand dollars. Mellett claims that the Plexus product can provide "a legal solution in 10 minutes" at 20% to 30% of the cost of the traditional consultative method -- no lawyer required, albeit Plexus lawyers were the indispensible architects for the underlying code.

From the video, it is unclear whether the innovation is an expert system -- akin to what Neota Logic or KM Standards are creating -- or artificial intelligence (AI) in the spirit of machine learning used in some of the best predictive coding algorithms or IBM's Watson applied to legal problems. Back when Richard Susskind published his PhD dissertation in 1987, Expert Systems In Law, an expert system was viewed as artificial intelligence--there was no terminology to speak of because the application of technology to law was embryonic. Now we are well past birth, as dozen of companies in the legal industry are in the toolmaking business, some living on venture or angel funding and others turning a handsome profit.

My best guess is that Plexus's new innovation is an expert system. But frankly, the distinction does not matter very much because both expert systems and AI as applied to law are entering early toddler stage. Of course, that suggests that those of us now working in the legal field will soon be grappling with the growth spurt of legal tech adolescence. For law and technology, it's Detroit circa 1905.

Nashville, TN. It is time to put down the broad brush used to paint BigLaw as inefficient and out of touch. At least for me, that is the big takeaway from the 2014 International Legal Technology Association (ILTA) conference, which took place this past week at the Gaylord Opryland Hotel in Nashville and included nearly 2,000 lawyers, administrators, staff, and vendors from around the world.

My takeaway is based on what I saw during the presentation session for the ILTA Most Innovative Law Firm Award. The three finalists all qualify as big: Bryan Cave (985 lawyers), Seyfarth Shaw (779 lawyers), and Littler Mendelson (1002 lawyers). Presenters from each firm had 15 minutes to share their innovations followed by 5 minutes of Q&A. Afterwards, ILTA members in attendance casted ballots for first, second, and third place.

Kudos to Bryan Cave, Seyfarth Shaw, and Littler Mendelson for publicly sharing their innovations, as it demonstrates a commitment to the broader legal profession.

In this post, I will describe the salient points of each innovation. I will err on the side of detail because, when it comes to innovation in the legal space, there is a short supply of “guts of the operations” commentary. I will then offer some macro-level observations. As it turns out, BigLaw has on balance a surprisingly good hand to play. Many will thrive, but at the expense of taking market share from the rest.

Bryan Cave has developed an ingenious and highly efficient way to educate its lawyers on the economics of its business. Prior to the presentation, I was familiar with the firm’s investment in a rigorous cost accounting system to guide the firm’s strategy and operations.

Yet, to get the full benefit out of such a system, the understanding needs to filter down to the individual lawyer-timekeeper level so that each lawyer-timekeeper can use the superior data to allocate time and effort in ways that strengthen the enterprise. Even in the year 2014, many successful and skilled BigLaw lawyers confuse revenues with profit. And the confusion is understandable because portable books of business, which tend to be measured in terms of revenue, drive the valuation of lateral partners. See Henderson & Zorn, Of Partners and Peacocks, Am. Law., February 2014.

Based on what I saw at ILTA, such confusion appears to have been substantially eliminated at Bryan Cave.

The core Bryan Cave innovation is a simple dashboard that tracks a variety of statistics at the lawyer, practice group, and firm level. What is most striking about the Bryan Cave initiative is the sensitivity shown to the large percentage of lawyers who are not comfortable processing numbers (“arithmophobia” was the term used in the presentation). The Bryan Cave innovation team dealt with this constraint in two ways.

1. The Octagon. The Octagon is a data visualization technique that communicates eight key metrics in an octagon-shaped graphic. Wondering what the term "data visualization" means? It's finding graphical ways to communicate complex multivariable data in a format that requires the end user, such as a lawyer, to have very little technical training. The Octagon is a textbook example. It uses colors and distance from the center of the graphic to convey essential information related to origination, client relationships, matter management, days to bill, days to collect, hours billed, leverage, and profit margins. (There may be other octagons containing other metrics--the one we were shown appeared to be geared toward partners.)

Each lawyer each month gets a new updated Octagon; and that graphic communicates, through its shape, the lawyer’s relative contributions to the firm. Specifically, there are distinctive patterns well known within the firm that tend to signal rainmaker, service partner, project manager, technical specialist, or some blend thereof. The features of the Octagon also communicate how well a lawyer is performing in his or her various roles relative to his or her peers. So, on a monthly basis, self-image confronts hard numbers.

This type of transparency is bound to have a profound effect on behavior. (During another ILTA session I heard, from another Bryan Cave presenter, that since the introduction of the Octagon a couple of years ago, the average days to collect has fallen from 60 to 44.)

2. The Rosetta. Some lawyers are bound to prefer a story rather than a picture. For these lawyers, the firm has created a narrative, referred to as the Rosetta, that translates the numbers into a diagnostic story of strengths, weaknesses, and, most importantly, specific prescriptive advice on how to improve.

But there is an interesting catch—the stories are all written with a computer algorithm. How is this possible? It’s a technology pioneered by a company called Narrative Science. Note that computers that are fed nothing but a traditional baseball scoring sheet now routinely write sports stories that summarize the game for the local sports page. This narrative summary accompanying the Octagon removes any lingering ambiguity regarding what the diagram means. Further, all report generation, including practice-group level Octagon and Rosetta reports, has been entirely automated.

I am told that the Octagon and Rosetta programs can handle, and properly incentivize, work that is done on either a billable or alternative fee arrangement basis. If this is true, Bryan Cave has an innovation designed for the legal market of the future.

Some readers may be turned off that the Bryan Cave innovation may seem, on the surface anyway, entirely focused on law firm financial performance. I am not. To my mind, this type of technology is valuable for communicating the fundamentals of the business. This reduces the myths and false narratives that routinely take hold in data-poor environments. This innovation is also timely because it is getting harder to give clients superior value while also delivering a strong return to the firm's owners -- the best of whom could lateral to another firm tomorrow.

The challenge of every BigLaw firm is getting all of the firm's stakeholders to row in the same direction. The combination of the Dashboard, Octagon, and Rosetta is a breakthrough in lawyer communication and, by extension, change management. Bryan Cave attorneys have the information they need to both build their practices while also advancing the broader goals of the enterprise.

Seyfarth Shaw’s innovation is the creation of a true Research & Development Department staffed by lawyers, project managers, technologists, and software developers. The charge of Seyfarth’s R&D Department is to build solutions in advance of perceived client needs. As the presenters mentioned, “we are not doing this because our clients are asking for these solutions; we are doing this because our clients will ask.”

Jordan Furlong is one of the first-rate commentators on the legal industry. He is an excellent observer, a deep thinker, and skilled and stylish communicator.

Over at Law 21, Jordan has written a set of companion essays that explain the ferment that is now taking hold in the legal industry. Check them out if you need or want the seemingly complex made simple.

The first essay is a highly useful reference guide to NewLaw (#NewLaw), a category coined by the Australian consultant George Beaton. Jordan modestly titled the essay "An Incomplete Inventory of NewLaw," but its alleged incompleteness does not distract from its usefulness. Complicated things like new business models need to be organized and simplified before we can get our heads around them. Here, Jordan creates a elegant typology and fills it out with example after example. Before Jordan's essay, few of us could be sure we were discussing the same ideas or concepts.

One of Jordan's most noteworthy observation is that the talent side of NewLaw is appears to be growing faster in the UK (new models of organizing and delivering legal services and content) while the US seems to be getting the most traction in legal tech. The former is likely due to liberalization of regulations that flow from the UK's Legal Services Act of 2007 and the latter from the proximity to venture funding. To have similar legal ecosystems developing in different ways is bound to trigger consequences and interactions that we cannot fully anticipate.

Jordan's second post is on the failure of legal innovation, which he points out is nothing more than the precursor long-term success. See "The Failure of Legal Innovation," Law 21, May 29, 2014. I definitely agree. When I look at the legal innovation space in 2014 -- and my frame for reference is LegalTech, LexRedux, ReInvent Law, some of the ABA Legal Rebels, and a lot of shoe-leather research on my part -- I think of Detroit in 1905. There were roughly 125 car manufacturers and hundreds more in other parts of the country, as Detroit was not yet car capital of the world. All of those business owners were right about one thing: The car is the future. But they wistful optimists about something else -- their car company is the future.

A start-up is like a sapling in the woods -- the odds are against it ever growing to the treeline. Fortunately, in the start-up ecosystem good ideas and talented entrepreneurs never really lose. Instead, they are rolled up into competitors to form the types of companies that can truly shape an entire new industry. Along these lines, if I were working in investment banking these days, I would be trying to specialize in the legal sector, as the roll-ups in this space are going to be fast and furious in the years to come.

Let's fasten our seatbelts. The next several years are going to be time of great tranformation.

In my inbox this morning was the HBS Daily Stat with the title, "You'll Absorb More if You Take Notes Longhand." Here is the accompanying explanation:

College students who take notes on laptop computers are more likely to record lecturers’ words verbatim and are thus less likely to mentally absorb what’s being said, according to a series of experiments by Pam A. Mueller of Princeton and Daniel M. Oppenheimer of UCLA. In one study, laptop-using students recorded 65% more of lectures verbatim than did those who used longhand; a half-hour later, the laptop users performed significantly worse on conceptual questions such as “How do Japan and Sweden differ in their approaches to equality within their societies?” Longhand note takers learn by reframing lecturers’ ideas in their own words, the researchers say.

Wouldn't the same analysis almost surely apply to law students? Experience tells me that many law students would argue that they are in the minority who learn better through computer transcription. But what if, given a choice, over half decide to use laptops? It would be likely that many, if not most, would be making the wrong tradeoff.

Data rarely changes hearts and minds. As a result, there is likely a gap between maximum learning/knowledge worker productivity and what we are able to accomplish in an education or workplace setting. Why? People like what they are used to and rationalize why data does not apply to them. There is a solution to dilemma, I suspect. We just have not found it yet.

The New York Times has is publishing a new series of short documentaries films called Op-Docs. The Op-Doc below is a dramatization of a deposition, albeit the script is a verbatim rendition of an actual deposition transcript. The plaintiff's lawyer is trying to establish whether the witness's office (which happens to be the Recorder for Cuyahoga County Court of Common Pleas) has a photocopy machine. Simple question, right?

The video is quite funny, but suffice it to say the verbatim transcript does not cast litigation in a favorable light. The fact that the Ohio judiciary is the defendant is even more troubling. Mediums like a documentary on the Times website seems like a promising change catalyst.

Every few months, whether I like it or not, I get served a slice of humble pie. I thought those tiring of the steady stream of law school critiques might find this slice particularly tasty, as someone else (me) is ingesting it.

Over the last few years, I have begun reading books on management and leadership. My interest in this topic is driven partly by my belief that law schools will be tooling up in this area in the years to come; and partly by a desire to learn about, and acquire, what I hope to teach.

The finest resource I have found on this topic is Management and Leadership: A Group of Letters to an Industrial Organization. This book was originally published in 1948 by Carl Braun, a prominent industrialist of the early and mid-20th century. Braun wrote this book, and several others, for the benefit of his managers at C.F. Braun & Co., which was an engineering company that designed and built many of the nation's oil refineries. I was drawn to Braun because his company was such a spectacular and enduring success.

The success, however, not not merely financial. What made C.F. Braun so successful for so long was Braun's relentless drive to maximize the potential of every person in his organization.

Now let's think about that -- reaping large profits by putting your people first. For Braun, this was not a abstraction. It was, in fact, the company's track record over a period of several decades. In 1989, 35 years after Carl Braun's death, C.F. Braun & Co. was sold to what is now Kellogg Brown & Root (KBR). And today, people who worked there are still reminiscing over the positive impact the company had on their lives and the lives of their families. If you think I am exaggerating, check out the C.F. Braun Alumni Group on LinkedIn.

I have read Management and Leadership several times. Without exception, each time I put the book down I feel both challenged and inspired. Well, this last time, I read the following passages in one sitting -- and suffice to say, the contrast hit be pretty hard. You be the judge.

Below in a section titled "The Doers Must Teach," Braun implores his managers to accept their role as teachers, as our nation's schools, including colleges and universities, lack the practical orientation of modern industry.

Our field of endeavor, industry, unlike medicine for instance, is one of those fields in which the teachers are not the doers. Our teachers, whether in grade-school, high school, or college, seldom have had industrial experience. Few have had even slight contact with industry. And fewer still have current contacts. Not understanding industry, they too often judge it by its worst members, and so develop for it an active disrespect.

The result is that, with rare exceptions, teachers do not find out from industry what industry needs from them. Nor do they seek from industry the teaching-methods that the better industrialists have developed. The gap is enormous between the abstract teachings of our schools and the concrete needs of industrial man. It is this gap that we industrial leaders must fill. We must fill in what's missing. And we must make the whole a living growing thing.

But that was not what Braun had in mind. About 20 pages later, Braun focuses on legal education and the case system as a beacon that will lead us to a better way.

The law schools have the right idea. They used to bore law students by droning at them from Blackstone - that encyclopedic treatise on law theory. But now they teach from concrete cases - and they've done it for eighty years. The student studies adjudicated cases - cases that are real, typical, modern. From these cases, with the help of his teacher, the student builds up the guiding rules.

This is the right method. Let it be our method. Let's shake ourselves free of the horrible methods we have been brought up on in our schools. Let's have no dogmatic rules in our teaching. Let's have no silly and artificial examples that nobody ever uses. Let's be sure that in all our teaching we start with concrete cases -- cases that are real, that are applicable to our purposes, and that preferably are within the practical experience of our learner.

Of course, in 1947, the year before Braun would extol law schools to his audience of engineers, the influential legal realist, Jerome Frank, published an incisive critique that called for the near complete overthrow of the 80-year tradition. See Frank, A Plea for Lawyer-Schools, 56 Yale L J 1301 (1947).

Alas, we humans often find the deepest faults with what is close and intimate, and greatest virtue with what is mythical and far away. How often a sense of accurate proportion eludes us. After several years traveling the country discussing legal education reform, I have gradually concluded that if I want to maximize my influence on change, I need to build and encourage, not criticize and debate.

Readers might enjoy my forthcoming essay, Letting Go of Old Ideas, 112 Mich L Rev _ (2014), which reviews two important new books on the legal profession, Steven Harper's The Lawyer Bubble and Richard Susskind's Tomorrow's Lawyers. If you want to know why the legal profession circa 2014 is such a rich topic for study, here is a useful clue: Harper and Susskind both critically examine this topic yet come to dramatically different conclusions that neither overlap nor conflict with one another. The complexities run that deep.

Thanks to his prolific commentary in the legal press, Harper's critique is familar to many readers. He is angry with the elite legal establishment -- large law firms and the legal professoriate -- for succumbing to "a culture of short-termism" that focuses obsessively on the AmLaw and US News league tables. As someone in the target group, I confess that I don't remember making a conscious decision to sell out. Yet, here is the problem. When all the facts in the public domain are arrayed by a skilled trial lawyer, the question can be asked, "why didn't you stand up to this nonsense?" This is a classic example of diffusion of responsibility. When we are all equally responsible for upholding good behavior, no one is responsible. Collective denial sets it, and the profession gets a black eye.

Yet, to my mind, there is an avenue for at least partial redemption -- reading Richard Susskind's slender 165 page book. In my Counterpoint essay, I lay out the mounting evidence that the legal industry is in the early stages of a sea change. The best theoretical treatment of this sea change is Susskind's Tomorrow's Lawyers. Yet, I am amazed at how many lawyers and law professors know essentially nothing about Susskind's work. Tomorrow's Lawyers was written for law students. It is a short, accessible book. After reading the first two paragraphs, I doubt anyone with a long-term time horizon in the legal industry will put it down without finishing it:

This book is a short introduction to the future for young and aspiring lawyers.

Tomorrow’s legal world, as predicted and described here, bears little resemblance to that of the past. Legal Institutions and lawyers are at a crossroads, I claim, and are poised to change more radically over the next two decades than they have over the last two centuries. If you are a young lawyer, this revolution will happen on your watch. (p. xiii).

If you have not read Tomorrow's Lawyers, you may be setting yourself for a Kodak moment.